Imagine being a 4h grade teacher with a class of 25 students with widely different levels of math aptitude and competency. How do you challenge the most adept students? How do you help the laggards without boring the stars to tears? The only practical option seems to be to teach to the middle. That it, unless you and your principal are lucky enough to have discovered Kahn Academy, which is in the process of disrupting the long-staid textbook publishers market and K-12 education. Kahn Academy is a stellar example of how any business today can thrive by capitalizing on open-market trends that are melting barriers to entry in most markets. Kahn Academy was started by a Salman Kahn, a hedge fund manager and brilliant communicator, an educator with a passion for teaching math and other lessons to kids. He developed effective on-line math…
Retail business model innovation prediction easier than Super Bowl bet
While bets are being placed on whether the Green Bay Packers will beat the Pittsburgh Steelers for the Super Bowl ring, I’m placing my bet on a dramatic transformation of retail chains’ business models over the next decade. The football outcome can’t be predicted – both teams are awesome, and we can’t predict players’ energy showing up for the four quarters and their emotions throughout, factors critical to the final outcome. Market changes are easier to forecast because underlying trends shaping market dynamics are observable. Strategic leaders, like good investors, are always on the lookout for changes in dynamics and how they will impact the strength of different business model strategies. “Phone-Wielding Shoppers Strike Fear Into Retailers,” a December, 2010 Wall Street Journal article might as well have been titled, “Retail Store Business Model No Longer Viable.” The article told the story of…
Can Business Model Innovation Help Curb Obesity?
I watched Food, Inc. over the holiday weekend, a documentary about US food companies whose products fill grocery store shelves and bins and supply our numerous restaurant chains. I’m a pragmatic independent, so I’m able to see through the one-sided nature of the filmmaker’s criticisms of food companies. But there’s significant merit in the film as well. The filmmakers argue that the application of factory methods to our food system in the last two decades – with its relentless drive to reduce costs – has stripped food of its nutritional value and safety. The catalyst to the change was the emergence of super-sized buyers the likes of McDonalds and Walmart. Even if you are not a McDonalds or Walmart customer, your food choices are being driven by their demands on suppliers. One net result, the film claims, is that we are a far…
Asknature.org: A biomimicry business model innovation
I love when trends come together, prompting innovations that make the world a better place. Frankly, this observation helps me recover my optimism after the news of the day invokes discouragement. Three trends – crowd sourcing, greater entrepreneurship within academic scientific communities and scarcity of natural resources – have come together to create asknature.org. The website is an open source search engine of all of biology, organized by the functions that living things accomplish. At maturity, it will be a searchable on-line encyclopedia explaining how each living organism biologists have studied operates, organized by terms that describe what functions or problems an innovator/entrepreneur hopes to address. Asknature’s goal, according to the website, “is to connect innovative minds with life’s best ideas, and in the process, inspire technologies that create conditions conducive to life. To accomplish this, we’re doing something that has never been…
Technology Strategy as Part of Larger Business Model Strategy
A potential client in a technology industry called me with an all-too-familiar story about his privately held company: • Established decades ago as a niche technology company • Successfully executed many technology evolutions and disruptions • Earned price premiums for decades due to outstanding service and quality • Survived the 2008 decline – hardest years in the leader’s professional life • Previously distant competitors (by geography and technology) are moving into his markets intensifying price competition • His largest direct competitor is now offering “one-stop full-line” solutions which are far more comprehensive than his company’s niche offerings Furthermore, his company’s sales force used to work directly with buyers, with relationships keeping win rates high. Now an online bidding system decides which company gets each order. After becoming “qualified” to compete by proving his company meets quality and service standards, his company must bid…
Market disruptions demand business model innovation
The 2008-2009 economic recession changed customer and business behaviors, not unlike how a hurricane reshapes the built and natural environment. If you are not incorporating recession-induced changes into your business model strategy, your market position will weaken. The Recession Has Changed Consumer Behavior – Forever A recent in-depth study of consumer attitudes and behaviors by Context-Based Research Group, an ethnographic research and consulting firm, adds to the growing evidence that consumers have changed for good. (Listen up B2B company leaders, because your customers will change along with these consumer changes.) Consumers, after living through needed financial downsizing or, for the wealthy, downplaying of wealth, have discovered there’s magic in less. According to the authors: “Our studies portray a society moving into an era where we measure the quality of our lives in social terms before economic ones. Forty-three percent of Americans believe the…
Democrats could learn from business model innovation best practices
The President’s current political, foreign policy and domestic issues remind me of running a business in challenging times. Never forget about customer experience and how markets change. Our economy totally tanked. Yet the Obama administration and Congress marched forward into health care as if nothing was really different. A more moderate approach to health care reform, coupled with a stronger emphasis on innovation initiatives to improve our long term economy would have been a smarter move on the administration’s and Democratic party’s part. To what extent is your business model based on old paradigms about your target market? Recognize competitive threats, but don’t get so focused on the threat, you lose sight of opportunities. The terrorist threat is daunting and must be managed, much like many competitive threats businesses face. But if all US policy’s focus is on this threat, as NYT columnist…
Business Model Lens into 2010
Best wishes for a joyous holiday. Here are the top trends I expect will shape our business models in 2010 and beyond and what leaders must do to address them. Downward pressure on prices in a copycat, increasingly global economy will magnify and become relentless. Before you spend more money pulling costs our of your existing business model, redefine your business model. The digital revolution will disrupt more industries, removing barriers to entry and the advantages of scale. Identify how to turn information technology into an advantage before existing and new competitors use it against you. Are there new channel opportunities? Can you reinvent your value chain? Change how you work with customers? Customers will trust less, being skeptical of all value promise claims. Offer transparent proof of your claims and make sure your value-promise is more than emotional. Talent, especially young talent,…
The Root Cause of Our Economic Mess Is Commoditization
If your business can’t offer its target market(s) differentiated benefits that matter, recognize that your business is stuck in a quicksand called commoditization. Endless cost cutting to survive the recession-magnified price discounting will only push you deeper into the muck, making it even harder to escape competing on price. You only have three smart options: Redefine your business model strategy to become the lowest cost competitor. You’ll earn profits despite market commoditization Redefine your business model strategy to escape commoditization and compete beyond price Exit the business Over the last ten years our economy’s productivity increased dramatically through industry consolidation, value chain and process redesign, outsourcing and IT investments. These changes lowered inflation, but also created pervasive commoditization. Big banks engaged in these activities and ended up as lumbering copycats of each other, earning their returns by taking enormous risks rather than having…
Strategic Leadership in Fearful Times
I took up rock climbing to confront my fear of heights. I’d follow my planned route, stopping to decide on my next steps. Stopping for too long, usually out of fear, was always a mistake. Fear aroused the oldest part of my brain that screamed, “Any move other than right back down the way you came is dangerous.” I’d hold onto the rock for too long, and only look narrowly in front of me, missing potential steps. I’d exert more energy than was needed, sapping my power to move upwards, and eventually forcing me to retrace my steps. We’re in the scariest economic time in our working lives (unless we worked in the Great Depression). Fearful, we hold tight to what worked in the past. The only next step we see is the age-old wisdom: “Cut costs and lower break-even points to conserve…