Image via Wikipedia Your business model strategy answers 5 core strategy questions about your business. Where will we compete? Who is (are) our target market(s)? What business are we in? Why will we win? What value promise (where value = benefits received less the price paid to acquire these benefits) will earn target customer loyalty? What differential advantage(s) will enable us to reliably deliver on our value promise and leave competitors unable to easily copy it? Why will we be profitable? What factors will lead our benefit-price exchange with customers to generate economic value (profits and shareholder value) for us? Wait, you might argue. Aren’t these questions product-positioning questions we ask marketing to answer? Yes. Business model innovation defines and position your organization’s entire offering. It forces you to think synergistically about your entire portfolio. In an economy in which the copying of…
The Real Strategy Work Is Business Model Innovation
Image via Wikipedia Many business leaders debunk strategic planning. “The external environment is too uncertain,” they argue. Or, “Strategy is decided at the point of contact with our customers and markets.” I also hate strategic planning because the decisions from strategic planning are strategic in name only. We delude ourselves into thinking that we’re planning strategically, when really we’re working at varying levels of the tactical. Year long tactical plans are as wasteful as a one-year plan for parenting teenage girls. Parenting tactics are decided daily subject to vision and values. There’s no other way through the confusion this age presents, just as there’s no other way through rapidly changing markets. The core strategy decisions for an organization are deceptively simple. The challenge rests in finding answers, as these questions are highly interdependent; and, strong competitors may have already claimed the obvious business…
Commoditization Rules, Even Before the 2008 Recession
Image via Wikipedia Commoditization – Why You Need a New Business Model Strategy In response to price pressures leaders have cut (and cut and cut) costs by outsourcing, off- shoring, consolidating, etc. Marketing departments have branded around compelling emotions expressed in powerful messaging. They’ve enhanced marketing communications to the point that potential listeners are tuning out and creating their own messages. Companies have also invested fortunes in new product development. We have three times the number of brands in our grocery stores than we had twenty years ago — I know because I live in Norway part of every month and I miss rows and rows of choice. What conference agenda or its promotional material doesn’t contain the multiple mentions of “innovation”? Our efforts aren’t working. Even before today’s daunting downturn, brand loyalty and premiums were dropping while bankruptcies and industry consolidations were…
Recessions Demand Business Model Innovation
Image by Calidonia via Flickr “When the tide goes out, you see who is standing naked.” (Warren Buffet) When Joseph Schumpeter described capitalism as creative destruction, he was talking about business model innovation. New or transformed companies take the place of companies that are lethargic due to size-induced bureaucracy or over-confidence. This transition, Schumpeter argued, drives a nation’s long term economic vitality and growth. Recessions are great, the economist in me argues, because they accelerate creative destruction. The business-owner in me wants this recession to end. These are downright scary times even for businesses like my own that lack significant fixed capital and an employment base in the hundreds or thousands. The wise advisor in me knows that we’re in times of rich opportunity, ripe for business model innovation. Why? Billions of new dollars in federal research and even more in infrastructure and…
Is Starbuck’s Instant Coffee a Smart Business Model Innovation?
Image by Getty Images via Daylife While Starbuck’s instant coffee may bring instant revenue (pun intended), will it enhance Starbucks’ brand value? I don’t think so. Instant Coffee pulls Starbucks further from a more differentiated value promise, a critical component of a winning business model innovation. Starbucks’ original value promise – the one that created its success – was a pleasurable place in the midst of busy lives to pause and connect with yourself or others. Starbucks made coffee into an affordable, luxurious time-out. Where Is Starbucks on the Slippery Slope to Commoditization? Starbucks’ push for global brand domination transformed its stores into miniature big box retail space, devoid of local content. Competitors copied the easy-to-copy coffee. No wonder McDonalds easily stole Starbucks’ customers by offering faster lines and lower prices for equivalent taste. Instant coffee isn’t the way back to uniqueness. Instant…
Why Business Model Innovation Matters
In November of 2008, Business Week magazine reported that Apple’s cash on hand exceeded Dell’s total market valuation. These two statistics explain how it happened – Apple net profit margin = Dell’s net profit margin plus 10 percentage points Apple operating margin = Dell’s operating margin plus 13 percentage points There is a vital lesson in the Dell-Apple financial comparison and it goes way beyond new product innovation. Apple has an incredible company-wide design competency upon which it built a differentiated business model. As a result, it introduces breakthrough new offerings while spending a much lower percent of revenue on R&D than other Top 25 innovative companies. The comparison in R&D spend tells you everything you need to know about the power of advantage and a differentiated business model built upon it. In Quarter 4 of 2008 – Apple R&D spend of 3.1%…
About Kay Plantes
My career has taken me into many organizations, but at each stop you’d see my deep passion for making a difference, a sharp intellect that creates clarity out of complexity, enduring optimism for others, gratitude, and spiritual wonder. Clients tell me that I’m an unusual blend of visionary and practical – able to see what’s possible in any situation but knowing what to do differently tomorrow to realize the possibility. By education, I’m an economist (Penn State-BS and MIT-PhD) who left a University of Wisconsin Madison assistant professorship after two years because I’m an advocate more than intellect. I relish applying knowledge rather than creating it. I started Plantes Company following the birth of my daughter, Lauren, who is now 30. We help leaders create thriving businesses through business model innovation and sharpened strategic leadership skills. We work largely with B2B companies, but…
Business Model Innovation – About My Blog
It’s gotten harder and harder to succeed in business for a long list of reasons that, like gravity, pull leaders into a short-term focus. Our planning deceives us into thinking we’re being strategic when in reality we’re just working at different degrees of tactical. The end result is that we’re too often operationally terrific and strategically shortsighted. Are you ready to unearth an exciting new growth strategy versus incremental improvements to today’s business? If so, you’re ready for business model innovation. My blog uses the lens of business model innovation to help you radically rethink what your business is all about in order to see previously hidden growth opportunities. Together, our conversation will help you create the mindset, mental-wandering, strategic thinking and knowledge that produces better growth strategy decisions and faster execution. Every organization has a business model whether or not leaders articulate…
Are You Aspiring to Strengthen Your Strategic Leadership Skills?
You know in your gut that you and your organization aren’t the best they can be and will be someday. You’re seeking thinking partners to help your team and your organization realize their full potential. You want to strengthen your strategic leadership skills. Business models look to be a promising or at least intriguing avenue of discovery. You’re an organizational leader or you work with them as a management consultant. You’re curious and a voracious learner, drawn to ideas, tools and information that will help you make a greater positive difference for others. You’re anything but narrow. You know that a lot can be learned outside ones own specialized expertise. In fact, your ability to see past the 3-foot deep concrete wall in front of you and cut a door through it creates your success. There’s so much strategy and management literature being…