Just 7 years ago, Motorola introduced the first thin cell phone to rave reviews and industry dominance. Yet, in a flash, it faced a flood of lower cost Asian knock-offs then lost its position to smart phones only to be bought by Google. Motorola’s engineering skills, supply chain excellence, and brand name strength were of little use in a massive industry upheaval enabled by new information technology. Google, meanwhile, moves from a once-distant competitor to posing a huge threat to Apple, RIM and Microsoft Windows. Google built mobile operating system leadership by acquiring and freely distributing Android. With its acquisition of Motorola, Google will likely become a device leader. No wonder Samsung’s reducing its reliance on Google’s Android system. In the Motorola story is the story of how the information age is making it harder and harder to win at business in the…
More than running shoes – a business model innovation Best Buy should model
Amazon’s quarterly revenue rose 51% year-over-year while Best Buy’s revenue remained flat. Is it any wonder Best Buy’s stock prices fell by one-third this year? What’s going on? A high percent of store visitors use Best Buy for decision-making but turn to the Internet to find best prices and make purchases. Without stores and with a government-given competitive advantage called “no sales tax,” Amazon has the lowest cost business model. Best Buy is stuck in commodity-competition quicksand, sinking steadily while customers see little difference between buying from them, Amazon or other reliable suppliers. Of course, lowest price wins. Best Buy is not alone. Most manufacturers and retailers are stuck in this situation. I saw a great solution to this dilemma while helping my husband Nick shop for running shoes at Road Runner Sports, the world’s largest on-line running and walking store with a…
Business model innovation when predictions can’t be trusted
I spent this morning with 14 business owner/CEOs confronting decisions made more challenging by our increasingly uncertain economy. As seasoned entrepreneurs, they’ve mastered measuring risks, making decisions and executing them successfully. Yet the decision-making prowess that generated high business values will not generate tomorrow’s success. How they approach decisions needs to change in today’s turbulent economy. We made a list of key known attributes of the economy – e.g., deficit, trade gap, aging of the population, high unemployment, China’s rise – and a list of unknowns, this list dominated by policy questions. How will the US resolve its deficit issues? Will China rebalance its economy towards domestic consumption? Will Greek and possibly other European debt defaults create another 2008-type recession, this time originating in Europe? Will US consumers regain their mojo or will growing income inequality (equal to Mexico today and the US…
Professional service firms need business model innovation too.
Commodity is likely the last word that attorneys, accountants, marketing agencies and other professional service providers would use to describe their services and knowledge. Their advanced degrees and personalized, professional approaches suggest just the opposite. But professional services are becoming commoditized because clients increasingly see the outcome of a service as standard; that is, differences from one qualified service provider to the next are irrelevant to the client’s desired outcomes. And some professional services are being transformed into on-line products. For example, QuickBooksTM and TurboTax® reduced very small companies’ use of accounting services. With the law, we see LegalZoom.com, an Internet-based law firm that commoditized straightforward legal procedures like wills and business formations, offering them online at substantial discounts. Companies are sending attorneys Requests for Proposals (RFPs) to take a company public or arrange financing, another signal that even more legal services are…